Greece is on the right path, says OECD’s new chief

Greece is on the right path, says OECD’s new chief

Greece is fundamentally on the right path and it must persist on that path, the new secretary-general of the Organization for Economic Cooperation and Development, Mathias Cormann, tells Kathimerini in an interview.

The former Australian finance minister welcomes the recent agreement on a 15 percent minimum corporate tax rate, while expressing optimism about Europe’s ability to find solutions to the challenges that crop up.

I’m curious, how can a German, who was born in Belgium, become finance minister of Australia and then secretary-general of the OECD?

I come from the German-speaking part of Belgium, which is sort of a minority part of the country, 65,000 German-speaking, out of 11 million, and I was always focused on a career in Belgium. So I went to school and the first few years of university in French and then I did my law degree in Flemish. So by the time I was 23, I spoke three languages. We just sort of didn’t speak English. So I went on an Erasmus exchange program to England for a year and ended up on holiday in Australia and never left. That’s the short version.

My example is perhaps a bit extreme. I was the leader of the government in the Senate, so I ended up being the number one in the Senate and the number one of the opposition was born in Malaysia, and one of my predecessors was born in Germany. So, in an Australian context, which is a migrant nation, it’s not necessarily unusual. And once I had served as finance minister in Australia for seven years-plus, this opportunity came up at the OECD.

What do you consider the most important challenge of the job?

I think the most important challenge is to ensure that the OECD continues to find the best possible solutions to the evolving challenges of our time. We always see the organization as made up of like-minded market-based democracies that share values around commitment to democracy, human rights and rule of law, market-based economic principles, and so on. I believe, and obviously all member-countries believe, that this offers the best opportunity to deliver the best possible living standards for our people. That’s what the OECD has done for the last 60 years and that’s what I hope it will continue to do, I’d like to think forever. And, right now, one of the challenges we are facing is the need for global cooperation, based on our shared values. But we want to optimize and strengthen the quality of post-Covid recovery and there’s a lot of work to be done with each other. We need to address the challenges that were there before the pandemic, whether that’s addressing climate change in a way that’s environmentally effective but also economically responsible, whether that’s making sure that we seize the opportunity of digital transformation as your government is working very hard to do here in Greece, but also better managing some of the risks and challenges associated with the transformation. I think the OECD has a role to play there. Greece, Australia and all other countries around the OECD were trading nations. It’s very important that there are clear rules and the rules are respected by all that participate in the global marketplace. And clearly there’s some pressure on that. I think that OECD members working together with each other need to play a role in the context of the World Trade Organization. I think that one of the strategic historic challenges of our time is how we ensure we have the best possible engagement with Asia and the Pacific region, which is going to be the part of the world where most of the global growth will be generated for some time to come. It is important that we focus on the best possible approach moving forward, recognizing that when it comes to market-based democracies on one side and China on the other, we have different systems and different political systems, different political and economic values.

I think you answered all my questions with one answer. There was a lot of talk about globalization being dead with the surge in protection. Because of the pandemic many countries started looking inward. Do you actually think globalization is dead, or is it going to sort of transform itself into something else?

We can never allow it to be dead, you know? I mean global competition is uncomfortable and disruptive and we’ve certainly got to be better. You know, when there is serious disruption and when groups of people are being seriously disrupted by the transformations that happened like the digitalization of the economy or massive innovation, we’ve got to get better at helping people with the upskilling the reskilling and transitional support. But in the end, competition, innovation is what drives improvements in living standards and improvements in the quality of life. And I guess the question I would put is, if a country protects itself from competition, it’s not as if that competition stops everywhere else. It just means that those compact competitive forces continue to play out everywhere else, they continue to drive progress and innovation and the countries that protect themselves fall further behind. But globalization is not something that is going to disappear. Globalization will continue to drive progress and improvements in living standards. We’ve just got to manage the downside risks and challenges associated with it better.

Do you think the global tax is a good idea?

The combined effects of globalization and digitalization of the the economy also meant that you ended up having a growing number of big companies selling products and services in markets where they had no physical presence and were able to minimize or avoid altogether paying tax in those jurisdictions. That was creating obvious unfairness and inequities. It was also causing problems in terms of the capacity of government to raise the revenues that need to rise in order to fund the essential public services they provide. So we needed a solution. And, you know, we are about to have a very comprehensive global agreement. Out of 139 countries in the inclusive framework that the OECD is coordinating, 130 have agreed to our proposals to ensure that new digital companies and large and very profitable multinational companies pay their fair share of taxes in the markets that they generate those profits as well as an agreement around the minimum level of global taxation of at least 15%.

You have the rare advantage of being able to see the world both from a European and an Asian perspective. Do you think Europe has a future? It’s an aging continent. It’s hard to reform in some ways.

I’m very optimistic about the future of Europe. I know Europe was always very good at being critical about itself perhaps.

But if you look at what was achieved in Europe since 1945, it’s unbelievable. Fundamentally there is peace, stability and prosperity across Europe, over a very long period to an extent that hasn’t been the case for any period before. There are always issues to be resolved. And, as I said before, the temptation always can be to look at all of the issues that need to be addressed and to forget all of the things that have been successfully addressed. Europe has a great capacity to find solutions. Sometimes it can take a while, and sometimes it can be a complicated and involved process, but fundamentally, I mean, Europe has a great capacity.

How do you view Greece?

Firstly, Greece is a beautiful country. It’s a country with a great history. It’s a country that in more recent times has gone through a difficult period, which has been well documented, but in the last few years has worked very hard to get itself back on a strong trajectory. I think the reform effort in recent years has been commendable and I think that there is a great passion and determination to be the best you can be. I think Greece will continue to do well. I think that Greece will continue to go onward and upwards.

Do you see any particular reforms that need to be enforced in the country?

We do regular economic surveys and we give advice to the government in that context. I think the challenge, and it’s not unique to Greece, is going to be to ensure that the workforce in Greece is able to participate and benefit from the digital transformation of our economies, and that will involve a significant effort around upskilling, reskilling and making sure that people here are positioned the best possible way to be part of the benefits of globalization. I think that is certainly something the government has been very focused on. Look beyond that right now, the key economic challenges everywhere, the number one economic challenge everywhere, including here, is to get to stay on top of the health situation, to the best extent possible, to really get everyone vaccinated. The number one economic policy priority right now is to ensure that as many people as possible are vaccinated against Covid, so that we can avoid future waves with variants of the virus that are resistant to the vaccines that we currently have. It’s going to be important to get the judgments right on when and how to adjust fiscal policy settings in Greece. So, at the right time, it is going to be important to reassess how best to build physical resilience in the context of what is likely to be challenges coming. I think that Greece, if you look back, is fundamentally on the right path and it’s a matter of persisting and continuing to go down that path.

One of the legacies of the past is the high level of debt, which is looming over the horizon. Do you think that at some point there has to be some sort of European or global agreement to deal with this high debt issue?

Greece went into the Covid crisis in a comparatively more challenging fiscal position than others. But in the context of the Covid crisis, governments had to step up and provide very significant fiscal support. And it’s got to be important at this point not to withdraw that fiscal support too early. And I say that as a fiscal conservative. It’s got to be important to maintain fiscal support or expansionary fiscal support for long enough until the economic recovery is really established and employment growth is established and the unemployment rate is coming down. But you know crisis level support is one thing. Of course, the first thing is to adjust the mix into more productivity-enhancing, forward-looking growth encouraging fiscal support rather than in a blanket way – supporting everyone, every business, including businesses that might not have a future. The fiscal support has to be structured so that the economy has an opportunity to adjust. The economy has an opportunity to find out which businesses and, hence, which jobs have a viable future. And then, when the economic recovery is well established and employment growth is well established and the unemployment rate is back to a more reasonable level, you’ve got to refocus on budget repair, balance sheet repair, fiscal repair.

The Greek government has proposed the creation of an OECD center on the island of Crete to study the interaction between economic and demographic trends. Will the plan move forward?

I very much welcome and appreciate the proposal. It is an important topic. We will now work with the Greek government and other stakeholders to explore the best way forward.

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